“Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-type Activities

The City of Smithville accounts for its
solid waste collection and disposal activities in an enterprise fund. The
balance sheet for the Solid Waste Disposal Fund as of December 31, 2013,
appears below.

CITY OF SMITHVILLE
Solid Waste Disposal Fund
Post-closing Trial Balance
As of December 31, 2013

Account
Title Debits Credits
Cash $ 288,000
Customer
Accounts Receivable 145,440
Allowance
for Doubtful Accounts $ 13,080
Inventories 5,040
Land 600,000
Buildings
1,650,000
Accumulated
DepreciationBuildings 750,000
Equipment
1,040,400
Accumulated
DepreciationEquipment 651,600
Vouchers
Payable 50,280
Accrued
Payroll and Fringe Benefits 86,830
Accrued
LiabilityEstimated Closure 204,000
/Post Closure Costs
Net
PositionNet Investment in Capital Assets 1,888,800
Net
PositionUnrestricted
84,290
Totals $3,728,880 $3,728,880

Required

a. Open
a general journal as of December 31, 2013, for the Solid Waste Disposal Fund by
entering each of the accounts and amounts shown in the above post-closing trial
balance. Enter 2013 from the drop-down [Year]
menu. Each of the account titles will be found in the drop down menu [Account (# – Description)] in the [Journal] view of the program. Be sure to enter 7-a as your paragraph number in the [Transaction Description] box and enter the appropriate paragraph number
for all subsequent journal entries.
Verify the accuracy of your journal entry and post it to the general
ledger by clicking [Post Entries]. Unless your instructor specifies e-mail
submission, print a post-closing trial balance as of December 31, 2013, and
retain it in your cumulative file until directed by your instructor to submit
it.

Entries
in this enterprise fund do not have to be recorded at the government-wide level
since enterprise funds and business-type activities at the government-wide
level both use the same (accrual) basis
of accounting and same (economic resources) measurement focus. Thus, the same information recorded in the
accounts of the enterprise fund can also, with only slight modification, be
reported as business-type activities at the government-wide level.

Please remember that before closing the City of Smithville, you must click on
[File], and [Save/Save As] to save your work.
Your work is NOT automatically saved.

b. Record
the following events and transactions, which occurred during the year ended
December 31, 2014. Be sure that 2014appears
in the [Year] menu.

[Para. 7-b-1]Billings to
customers of the Solid Waste Disposal Fund totaled $2,268,960 for the
year, including $16,500 billed to City of Smithville departments accounted
for in the General Fund. For the amount billed to City of Smithville
departments you should debit Due from Other Funds.

[Para. 7-b-2]Equipment
costing $300,000 was purchased on July 1, 2014. Cash in the amount of
$200,000 was paid at the time of purchase; the vendor accepted revenue
anticipation notes in the amount of $100,000 to finance the remainder of
the equipment. Of this amount,
$50,000 of the notes will be payable on July 1, 2015; the other $50,000
will be payable on July 1, 2016. All notes bear interest at the rate of 5
percent per year. (Record only the purchase and the related payment of
cash and issuance of notes at this time; interest will be recorded in a
later transaction.)

[Para. 7-b-3]Vouchers for
materials and supplies to be used in the operations of the fund were
issued in the total amount of $773,500. (Debit Inventories)

[Para. 7-b-4]Collections
from customers totaled $2,190,900 during 2014. This amount included $10,100 collected
from the General Fund (see Transaction 7-b-1 above).

[Para. 7-b-5]Payrolls and
fringe benefits paid in cash during the year totaled $1,182,800, including
the amount accrued at December 31, 2013.

[Para. 7-b-6]Accrued
salaries and fringe benefits at year-end amounted to $66,720. Inventories of materials and supplies
used in operations during the year amounted to $774,480, at cost.

[Para. 7-b-7]Vouchers in
the amount of $778,600 were paid during the year.

[Para. 7-b-8]The city
uses the following annual straight-line depreciation rates: Buildings, 2.5
percent; Equipment, 10 percent (equipment purchased during the year need
not depreciated because it was not held for more than 6 months of the
year). Apply these rates to the original cost of buildings and equipment
as of December 31, 2013, assuming no residual or salvage value.

[Para. 7-b-9]Interest of
$2,500 had accrued on revenue anticipation notes as of year-end (see
transaction 7-b-2).

[Para. 7-b-10]Management
decided to increase the allowance for doubtful accounts by $3,060 at
year-end.

[Para. 7-b-11]The City of
Smithville estimates that for the citys landfill the total current cost
for closure and postclosure compliance with the Environmental Protection
Agency rules discussed in Chapter 7 will be $1,440,000. Based on the
percentage of estimated capacity of the landfill used in the current
period, the current period expense and related liability for future
closure and post closure costs is $120,000.

[Para. 7-b-12]On December
31, 2014, prior to preparing closing entries, the Solid Waste Disposal
Fund was charged for materials and supplies expense in the amount of
$12,000 that had erroneously been charged as an expenditure of the General
Fund (see transaction 15 of the General Fund in Chapter 4 of this
cumulative problem). You should
credit Due to Other Funds.

After
verifying the accuracy of all entries for the preceding transactions, post
amounts to the general ledger accounts by clicking [Post Entries].

c.
Prepare entries to:
1.
Close all operating statement accounts at the end of
2014 and to
2.
Reclassify the two net asset accounts, as
appropriate. See the top of page 258 in
the textbook for an explanation of what Net Position Net Investment in
Capital Assets represents.

Be sure that the check mark for [Closing
Entry] is on for each account being closed and that Closing Entries
appears in the [Transaction Description] box. When completed, post the closing entries to
the general ledger by clicking [Post
Entries].

c.
Go to [Reports]
and print the pre-closing and post-closing trial balances for the Solid Waste
Disposal Fund as of December 31, 2014.
Retain in your cumulative folder until directed by your instructor to
submit them, unless your instructor specifies submission of computer files via
e-mail, in which case you will need to save a .pdf version of your trial
balance.

[Note: Retain a printout of all worksheets and
your financial statements in your cumulative file until directed by your
instructor to submit them, unless your instructor specifies that you should
submit computer files via e-mail.]
Chapter 7 Recording
Transactions Affecting the Enterprise Fund and Business-type Activities The City of Smithville accounts for its
solid waste collection and disposal activities in an enterprise fund. The
balance sheet for the Solid Waste Disposal Fund as of December 31, 2013,
appears below.CITY OF SMITHVILLESolid Waste Disposal FundPost-closing Trial BalanceAs of December 31, 2013Account
Title Debits CreditsCash $ 288,000Customer
Accounts Receivable 145,440Allowance
for Doubtful Accounts $ 13,080Inventories 5,040Land 600,000Buildings
1,650,000Accumulated
DepreciationBuildings 750,000Equipment
1,040,400Accumulated
DepreciationEquipment 651,600Vouchers
Payable 50,280Accrued
Payroll and Fringe Benefits 86,830Accrued
LiabilityEstimated Closure 204,000 /Post Closure Costs Net
PositionNet Investment in Capital Assets 1,888,800Net
PositionUnrestricted
84,290 Totals $3,728,880 $3,728,880a. Open
a general journal as of December 31, 2013, for the Solid Waste Disposal Fund by
entering each of the accounts and amounts shown in the above post-closing trial
balance. Enter 2013 from the drop-down [Year]
menu. Each of the account titles will be found in the drop down menu [Account (# – Description)] in the [Journal] view of the program. Be sure to enter 7-a as your paragraph number in the [Transaction Description] box and enter the appropriate paragraph number
for all subsequent journal entries.
Verify the accuracy of your journal entry and post it to the general
ledger by clicking [Post Entries]. Unless your instructor specifies e-mail
submission, print a post-closing trial balance as of December 31, 2013, and
retain it in your cumulative file until directed by your instructor to submit
it. Entries
in this enterprise fund do not have to be recorded at the government-wide level
since enterprise funds and business-type activities at the government-wide
level both use the same (accrual) basis
of accounting and same (economic resources) measurement focus. Thus, the same information recorded in the
accounts of the enterprise fund can also, with only slight modification, be
reported as business-type activities at the government-wide level.Please remember that before closing the City of Smithville, you must click on
[File], and [Save/Save As] to save your work.
Your work is NOT automatically saved.b. Record
the following events and transactions, which occurred during the year ended
December 31, 2014. Be sure that 2014appears
in the [Year] menu.c.
Prepare entries to:1.
Close all operating statement accounts at the end of
2014 and to2.
Reclassify the two net asset accounts, as
appropriate. See the top of page 258 in
the textbook for an explanation of what Net Position Net Investment in
Capital Assets represents.Be sure that the check mark for [Closing
Entry] is on for each account being closed and that Closing Entries
appears in the [Transaction Description] box. When completed, post the closing entries to
the general ledger by clicking [Post
Entries]. c.
Go to [Reports]
and print the pre-closing and post-closing trial balances for the Solid Waste
Disposal Fund as of December 31, 2014.
Retain in your cumulative folder until directed by your instructor to
submit them, unless your instructor specifies submission of computer files via
e-mail, in which case you will need to save a .pdf version of your trial
balance. [Note: Retain a printout of all worksheets and
your financial statements in your cumulative file until directed by your
instructor to submit them, unless your instructor specifies that you should
submit computer files via e-mail.]”